Distressed market remains soft; Caesars debt stays active, mostly lower; retailers taking hits

By Stephanie N. Rotondo

Phoenix, April 8 - The distressed debt market was again trending toward the weaker side on Tuesday.

Traders also noted that investors were not so focused on the space, but instead on the high-yield new issue flow.

"It seems like the new issue calendar is absorbing peoples' attention," a trader commented.

Caesars Entertainment Corp. remained active during the session.

The company is currently facing allegations of fraudulent transfer from two groups in regards to its transfer of four properties to affiliate Caesars Growth Properties.

One trader said the 11¼% notes due 2017 were off half a point at 95, with about $25 million bonds trading. Another $22 million of the 10% notes due 2018 were exchanged around 47 3/8, which was "pretty much unchanged."

The 9% notes due 2020 were meantime off almost a point at 86¾ and the 8½% notes due 2020 lost a point to finish around 853/4.

Another market source pegged the 10% notes at 47½ bid, up half a point.

The world of retail continued to be weak as well.

A trader saw Toys 'R' Us Corp.'s 7 3/8% notes due 2018 falling a point to 761/2, while another deemed the issue down 1½ points at 76½ bid.

Claire's Stores Inc.'s 8 7/8% notes due 2019 followed the sector's trend, declining almost a point to 841/2.

But it was RadioShack Corp.'s 6¾% notes due 2019 that got hit the hardest among retailers. One trader said the debt was off over 2 points at 49. Another trader echoed that price, calling it "down another 2 points."

There was no fresh news out on the Fort Worth, Texas-based electronics retailer.

In the coal arena, bonds were on the mixed side.

A trader said Alpha Natural Resources Inc.'s 6¼% notes due 2021 dropped slightly to 763/4, though the 6% notes due 2019 increased half a point to 80.

A second source placed the 6¼% notes at 781/4, up nearly a point.

Arch Coal Inc.'s 7¼% notes due 2020 lost a bit to end around 773/4.

And, James River Coal Co.'s 7 7/8% notes due 2019 were "still around 13," a trader said.

The company filed for Chapter 11 protections on Monday.

Momentive Performance Materials Inc.'s 9% notes due 2020 were one of the few bright spots of the day, as traders saw the issue inching back up after being depressed for the last few sessions.

The company is rumored to be planning a mid-April bankruptcy filing.

One trader called the issue up half a point at 79.

"They seem to be the only thing that's trading," another trader said of the 9% notes in relation to the rest of the company's capital structure. He saw the paper opening around 78 and then climbing up to 79.

Fannie, Freddie improve

Fannie Mae and Freddie Mac preferreds were gaining ground in Tuesday trading, following comments made by Sen. Sherrod Brown (D-Ohio) at a Bloomberg Government breakfast meeting.

Brown, also a member of the Senate Banking Committee, said that it was unlikely any of the bipartisan reform efforts put forth would actually get passed into law this year.

Brown also called for a simpler plan the complicated ones already on the table.

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose a quarter, or 2.62%, to $9.80. Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) increased 24 cents, or 2.42%, to $10.14.

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